Summary of Chapter 10 of the book Financial Accounting theory
Accounting theories and practice chapter 9 summary of the book financial accounting theory
Summary Accounting and Governance (book Scott - Financial Accounting Theory)
All for this textbook (7)
Written for
University of the Southern Caribbean
Accounting theories and practice (ACCT485)
All documents for this subject (3)
Seller
Follow
Akila007
Content preview
Summary of Chapter 11
Chapter 11 deals with Earnings Management
What is earnings management?
“Earnings management is the use of accounting techniques to produce financial statements that
present an overly positive view of a company's business activities and financial position so in other
words earnings management is a method of manipulating financial records to improve the appearance
of the company's financial position.”(Tuovila,2019)
Companies use earnings management to present the appearance of consistent profits and to smooth
earnings' fluctuations.
One of the most popular ways to manipulate financial records is to use an accounting policy that
generates higher short-term earnings.
Earnings management can
be conducted through
accounng changes or esmates
(accrual-based
EM), but also through
managing transacons (real
transacons earnings
management).
, Discreonary accruals –
Accruals not explained by
economic fundamentals
(intuion behind
accruals models)
Note: accruals reverse –
managing earnings upward
now means lower earnings
later
Earnings management can
be conducted through
accounng changes or
esmates (accrual-based
EM), but also through
managing transacons (real
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Akila007. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.49. You're not tied to anything after your purchase.
